Rupee falls to record low, Mukherjee blames global conditionsNovember 22nd, 2011 - 3:26 pm ICT by IANS
Mumbai, Nov 22 (IANS) The Indian rupee fell to a record low of 52.73 to a dollar in early trade Tuesday, making imports especially of oil costlier, and sparking fears that it could stoke inflation and widen the country’s fiscal deficit.
The rupee slipped to the new low in early trade, but later recovered to 52.31 around 1.10 p.m. The Indian currency has weakened now over 16 percent in the last four months, having touched a high for this year in July.
Finance Minister Pranab Mukherjee, however, said the rupee’s fall was a reflection of international economic uncertainty and added that an intervention by the Reserve Bank of India (RBI) would not help much at this stage.
“We expect there will be a self correction in the market,” Mukherjee told reporters Tuesday.
Importers, especially oil companies, are now jumping in to buy dollars on fears that the rupee could slide further and make imports costlier.
The RBI, which usually steps in to curb volatility in the currency, has not done so yet. Subir Gokarn, deputy governor of teh RBI, said the central bank was weighing its options.
“We don’t have a target or a rate in mind, the rupee is moving according to market dynamics. It’s disruptive, there is no question,” said Gokarn.
“There’s an impact on companies and it’s a problem. But, any action we take now, if any, has to take into account the fact that these actions might have consequences further down the road. So, we’ve got to balance out actions now with the risks of potential increases in vulnerability later,” he added.
The markets are, however, worried. Monday saw Indian equities end in losses with the 30-scrip benchmark index of the Bombay Stock Exchange shedding 2.6 percent.
“From a fundamental perspective, the worry doesn’t seem to be over as we might witness rupee further weakening in the absence of urgent RBI intervention,” said D.K. Aggarwal, chairman and managing director of SMC Investments and Advisors.
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